Friday, March 13, 2009

The Worst Of Times, The Best Of Times To Come?

Grim economic news is all around us. Not only are individuals facing the toughest economic times, businesses are hurting and entire industries are facing extinction. There has been a lot of discussion going on about several industries. Even though the headlines may be full of news about the problems faced by individual companies - like Citibank, AIG, Bank of America, General Motors and Chrysler - few are debating whether the entire automobile, banking, insurance or even real estate industries will shut down completely. But there are several industries whose very existence is being questioned.

These include the newspaper, music, book-publishing and Hollywood film industries. Each of these industries has been in flux for more than a decade. Each has had predictions associated with it that ranged from their growing even larger and more successful to completely dying within a matter of years. In the case of each of these industries, even more than changing consumer behavior, challenging economic times, bad management or unsustainable business models, the threat cited most frequently has been the Internet.

There are several key points I make to my consulting clients in the media and technology industries when starting a discussion on crafting their strategies for the next 10 and 20 years. The reality is that the Internet did change everything. What the Internet did was give every industry an opportunity to become stronger, more efficient, more effective and smarter. Or they had to choice simply to use the Internet as just another business tool - without any thought being given to reconsidering outdated business models.

The following four industries muddled along for the last 20 years. They talked about how they were leveraging the Internet. They even started several initiatives to show how they "got" the Internet. They bought nice domain names and set up slick websites. They even hired people and gave them fancy titles like Vice President of Internet Strategy etc. but they did not truly "get" it. They did not go back to the drawing board to re-evaluate their business models and see how the Internet could help or hurt, especially if bad economic times ever hit. That is exactly what the bad times did do. They hit, and they hit hard.

That is why these are the industries most at risk. A respected commentator and very powerful writer, Cory Doctorow, had written a good piece, in Internet Evolution, analyzing these four industries. He made some good points, but I had a slightly different opinion. Here is what I think about the following industries and how they can still survive, maybe even thrive, in the coming years.

- Newspapers

Even though old industries, and their biggest players, are often threatened by new technology - it can sometimes take 100 years or more for an entire industry to die. One way to ensure that death is for the industry not to take threats to its existence seriously. In the case of the newspaper industry it is already several hundred years old (well, almost).

In the past it survived by actively leveraging all the available new technologies, from the printing press to desktop publishing, not just to survive but to thrive.

When radio and TV started to be a threat to the printed newspaper, it was the newspaper owners that went on to own most of the radio and television stations. But that means they co-opted, not leveraged, the new technologies and challenging platforms.

The reason the newspaper is having such a hard time with the Internet, especially in these dire economic times, is two-fold. One is that the element of huge investment requirements that former newspaper (and added radio/TV) empires were built on is now gone.

As a matter of fact, it is now a serious liability. Almost anyone can now start a "newspaper" or information service. Online news services now abound. There are even white label companies and websites allowing anybody to set up their own "newspaper" simply by slapping together a combination of news feeds from multiple sources. The newspaper industry, in the meantime, remains hobbled by huge investments in real estate, printing equipment, high salaries and administrative costs.

The second is still relying on the old economic business models. An over-reliance on advertising became a disaster when first the Internet took away a lot of the advertising revenue, and then the recession killed ad sales even more. I still think newspapers, as an industry, will not die any time soon. Newspapers still offer things online media cannot do at this time. Some are tangible, some intangible.

In tangible, the quality of print and the subtleties of layout and design are still unmatched on the fanciest LCD screens or in most complex HTML pages. Intangibles, like convenience, the ability to tear out an article for later reading, are important. But most of all, permanence of record and trust, are "solid intangibles" that newspapers have not yet learnt to push into the value proposition their readers associate with them.

In my humble opinion, newspapers will survive, in new and different forms. They need to leverage and market the tangible and intangible values they offer to grow. But they can only do so if and as soon as they figure out the ability to move from a bundled "all the news we see fit to print" to an unbundled, micro-payments enabled, micro-targeted, 100% customized, personal tool and service that readers cannot live without holding in their hands.

- Music

Ironically, the death of the music labels industry will actually be the rebirth of the music industry. I do not even refer to "the long tail" business model (where the idea is that instead of making lots of money from one big splash, one can make lots of money over a long period of time, or over a large number of small sales).

The new positive fact is that creators of music can get paid directly, even 100%, from their consumer and clients - without a middleman. That renders obsolete an entire industry built on many middle layers. That means that music as an industry can actually thrive now that it is unshackled and the long overused, even clichéd "disintermediation" is here to stay.

This new world will be the death toll for middle-later but it can be music to creators' and consumers' ears. This will require a new way of doing things. Music production and distribution online have already changed the way the business is starting to run. What is still missing is musicians, bands and other talent from getting on the electronic micro-payments bandwagon (no pun intended!).

As micro-payments become more prevalent (in my opinion, the indie music scene should be one of the biggest champions of that) I see huge opportunity for musicians of all types to make good money, - even without having to rely on live performances as a source of income.

- Books

Just like the introduction of electronic documents was supposed to have brought about the death of the paper-products industry, predictions of the demise of the book industry are premature. The future of the book industry is still being written. How and where and it's published is still in the industry players' hands.

What today's technology is enabling people to do is to see themselves as potential authors, not just book buyers or readers. Lulu, Blurb, CafePress, XLibris and many others are offering to make us published authors for little cost. That means the actual number of book editions, eBooks or printed, will actually rise as almost everyone becomes an author. What will be surprising will be that the actual total number of physical book shipments will also rise.

This is almost similar to how more pages of paper went through laser printers the more documents became available to read online. In the case of the new books industry, will each one of them be a blockbuster? Most probably not.

However, even if the total number of blockbuster books physically printed goes down, in my humble opinion, the actual physical number of total books printed, using the newest services and technologies, will significantly rise.

At least for the next 30 years I still see authors believing in the higher perceived value of having a published paper-based book in their bookshelf than an eBook on their hard drive.

- Movies

Even though I am now equipped with a fully tapeless HD camera, and as well as the latest Apple tools for video editing, I do not foresee any of my creative endeavors, even in my wildest dreams, in any way threatening the amazing world of magic that comes from the best of Hollywood. (We're talking about the good stuff, not a lot of the recent Adam Sandler and Ben Stiller stuff).

The fact that some Hollywood blockbuster movies can cost $300 million is not a sustainable business model. That is not because YouTube type videos threaten it, but because of the sheer lunacy of the numbers.

The huge chunk of money that is paid to movie stars, some making $25-$30 million per movie, regardless of how famous they are, is the biggest needed cut I see coming. The falling costs of special effects and computer animation, and easier availability of the skills for them, are becoming more tangible forces on the industry. That gives technologists and the IT industry a bigger cut of the next generation Hollywood Dollars Pie.

I foresee more, and better, Hollywood movies being made for a fraction of today's costs., with more reasonably priced talent and higher reliance on technology and creativity of individuals, not large companies. Hollywood can do that while still being significantly better than most low-budget flicks, thereby ensuring it an audience worldwide, for many years to come.

Throw in the ability to make micro-payments for movies streamed or downloaded from the Internet to our devices of choice, and you can see a whole new revenue stream becoming available to sustain Hollywood as well as Bollywood.

==

Imran Anwar is a New York and Miami based Pakistani-American entrepreneur, Internet pioneer, inventor, writer and TV personality. He can be reached through his web site http://imran.com and imran@imran.com . You can follow him on Twitter at http://twitter.com/imrananwar